The U.S. economy probably ended last year with the longest stretch of 3 percent-or-better growth since 2005. The $17 trillion question is, can it keep up this performance this late in the business cycle?
Solid consumer spending, accelerating business investment and a housing rebound combined to drive fourth-quarter demand in the world’s largest economy. Gross domestic product expanded at a 3 percent annualized rate after 3.2 percent in the third quarter and 3.1 percent in the previous period, according to the Bloomberg survey median ahead of Commerce Department data, according to Bloomberg.
Tax cuts championed by President Donald Trump have fueled expectations of an extended boom in capital spending and buoyed household confidence. Maintaining economic growth of at least 3 percent, a goal of the president’s, is a bigger challenge. One reason is household consumption — which accounts for about 70 percent of GDP — may struggle to pick up amid tepid wage gains, rising debt and gradually increasing borrowing costs as the Federal Reserve tightens monetary policy.
“The economy entered this year with solid momentum,” said Ryan Sweet, an economist at Moody’s Analytics Inc. in West Chester, Pennsylvania. “Consumers did their part. Business investment picked up. We’re coming off of a very strong second half, which will be difficult to duplicate,” as “there’s going to be a bit of a spending hangover.”
The U.S. economy grew faster than initially thought in the third quarter, notching its quickest pace in three years, buoyed by robust business spending on equipment and an accumulation of inventories.
Gross domestic product expanded at a 3.3 percent annual rate last quarter also boosted by a rebound in government investment, the Commerce Department said in its second GDP estimate on Wednesday. That was the fastest pace since the third quarter of 2014 and a pickup from the second quarter’s 3.1 percent rate.
The economy was previously reported to have grown at a 3.0 percent pace in the July-September period. It was the first time since 2014 that the economy experienced growth of 3 percent or more for two straight quarters.
Fed Chair Janet Yellen told lawmakers on Wednesday “the economic expansion is increasingly broad based across sectors,” and that she expected that “the economy will continue to expand.”
So what was that about “trickle down” economics not working? The evidence once again suggests otherwise, and we should all be thankful President Trump followed the Reagan model for the economy.
Mr Americana, Overpasses News Desk
January 25th, 2018